Year: 2014

When we told American friends we had been invited to go to Nigeria, most said: “Try not to catch ebola.” This, as you will see, summed up beautifully a misconception in the United States (and elsewhere, we’re sure) about Africa in general and Nigeria in particular: many people are not well informed about Africa.

Our recent letters have highlighted some of the opportunities that we now see relating to more effective use of letters of credit. There happen to be stunning limitations within the banking systems in different countries in the world, not just in developing nations but even within the European Union. One advantage we have is the ability to bring receiving banks into play which are still entrepreneurial in encouraging and being open to assist in trade finance.

We hear regularly from clients working to use their capital the best way they can. Some are nervous about using OPM (Other People’s Money) and use strictly their own capital without ever reaching out to other sources. Others don’t have a lot of capital and are searching for ways to make their small amount of capital stretch a whole lot further.

This is our mid-winter message to readers in the southern hemisphere. We have relatively few readers there, but everybody’s gotta be someplace, and in a world where somebody’s always awake working, it helps to keep things in perspective, even if you’re at the beach.

We field a lot of inquiries here. One of the most popular requests we get is for standby letters of credit. We know many of the reasons people ask for them. By far, the most popular reason is that someone told the client that they had to have one to do what they wanted to do.

We saw a headline recently in the Wall Street Journal that said: Bank Financing Played Big Role in Trade Collapse. It referred to a study by two prominent economists of the economic difficulties in 2008/9, noting that a shrinkage in the supply of letters of credit had a large effect on world trade and the global economy. Further, such a shrinkage affected developing countries even more.